Sureshot Golf Ventures, Inc. v. Topgolf Int'l, Inc.
| Decision Date | 24 August 2017 |
| Docket Number | CIVIL ACTION H-17-127 |
| Parties | SURESHOT GOLF VENTURES, INC., Plaintiff, v. TOPGOLF INTERNATIONAL, INC., Defendant. |
| Court | U.S. District Court — Southern District of Texas |
Pending before the court is defendant Topgolf International, Inc.'s ("Topgolf") motion to dismiss. Dkt. 10. Having reviewed the motion, response, reply, and the applicable law, the court is of the opinion that Topgolf's motion to dismiss (Dkt. 10) should be GRANTED.
This is an antitrust case between plaintiff SureShot Golf Ventures, Inc. ("SureShot") and defendant Topgolf. Topgolf was established in 2000 with multiple locations in the United States and the United Kingdom as a "golf entertainment center"1 which offers point-scoring golf games as well as food and beverages. Dkt. 1. Customers hit golf balls toward a series of holes and are scored based on distance and accuracy. Id. SureShot was established at or around 2014 with the intent to compete with Topgolf's golf entertainment centers. Id. at 5.
At issue is the technology used to track the location of each golf ball. Topgolf developed its own proprietary technology to track the location of the golf balls. Dkt. 1. SureShot has licensed theuse of the ball-tracking technology, the Protracer Range System, produced by the Swedish company Protracer. Dkt. 1. SureShot alleges that the Protracer model is "superior" to Topgolf's because the Protracer's software tracks the balls in flight, adds graphics to make the ball visible in near real time on a television monitor, and thus creates a three-dimensional gaming experience. Id. SureShot contends that Protracer's proprietary hardware, technology, and licensed software is integral to SureShot's business model. Id.
On April 17, 2015, SureShot entered into a five-year licencing agreement with Protracer, that lasts from 2015 to 2020 (the "Frame Agreement"). The Frame Agreement required Protracer to install Protracer Range Systems in up to 500 SureShot bays and five SureShot facilities each year and provide support and maintenance. Id. SureShot also alleges that Protracer stated that it would not enter into any exclusive contracts with a licensee. Id.
On May 24, 2016, Topgolf acquired Protracer and the Protracer Range System. Dkt. 1. According to Topgolf, SureShot continues to use the Protracer technology and it has not been deprived of any access. Dkt. 10. SureShot, however, argues that Topgolf's acquisition of Protracer means that Topgolf controls the very technology that SureShot built its business model upon, and thereby "den[ies] SureShot access to long-term, continued licencing of Protracer technology and purchasing of Protracer equipment." Dkt. 1 at 12. SureShot argues that TopGolf intends to foreclose market competition. Dkt. 1 at 10. SureShot cites TopGolf's refusal to give SureShot assurances that Protracer would continue to be available after the expiration of the five-year Frame Agreement as evidence. Dkt. 1 at 10. SureShot alleges that an executive from Topgolf said to SureShot that, "If I was in your position, I would look for alternatives." Id.
On January 17, 2017, SureShot filed a complaint against Topgolf alleging four federal antitrust claims: (1) conspiracy under Section 1 of the Sherman Act, (2) monopolization and (3)attempt to monopolize under Section 2 of the Sherman Act (15 U.S.C. § 1, 2), and (4) unlawful acquisition under section 7 of the Clayton Act (15 U.S.C. § 18). Dkt. 1. On April 13, 2017, Topgolf filed a motion to dismiss. Dkt. 10. SureShot responded and Topgolf replied. Dkts. 14, 16.
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges a federal court's subject matter jurisdiction. Federal courts have limited jurisdiction; without jurisdiction conferred by statute, they lack the power to adjudicate claims. See Stockman v. Fed. Election Comm'n, 138 F.3d 144, 151 (5th Cir. 1998). Under Rule 12(b)(1), a claim is properly dismissed for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the claim. Home Builders Ass'n, Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998).
"Federal Rule of Civil Procedure 8(a)(2) requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 127 S. Ct. 1955 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99 (1957)). In considering a Rule 12(b)(6) motion to dismiss a complaint, courts generally must accept the factual allegations contained in the complaint as true. Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). The court does not look beyond the face of the pleadings in determining whether the plaintiff has stated a claim under Rule 12(b)(6). Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999).
"[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, [but] a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to reliefrequires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citations omitted). The "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. The supporting facts must be plausible—enough to raise a reasonable expectation that discovery will reveal further supporting evidence. Id. at 556. When considering a motion to dismiss for failure to state a claim, "a district court must limit itself to the contents of the pleadings, including attachments thereto." Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000).
Section 1 of the Sherman Act prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." 15 U.S.C. § 1. While section 1 could be interpreted to proscribe all contracts, see, e.g., Board of Trade of Chicago v. United States, 246 U.S. 231, 238 (1918), it is never "taken [as] a literal approach to [its] language." Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006). Rather, section 1 "outlaw[s] only unreasonable restraints [on trade]." State Oil Co. v. Khan, 522 U.S. 3, 10 (1997).
Section 2 of the Sherman Act makes it unlawful for an entity to "monopolize." 15 U.S.C. § 2. Monopoly power is "the power to control price or exclude competition." United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391, 76 S. Ct. 994 (1956). To prove monopolization, a plaintiff must show: "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S. Ct. 1698 (1966). A prerequisite of an attempted monopolizationor monopolization claim is proof of the relevant market. C.E. Servs., Inc. v. Control Data Corp., 759 F.2d 1241, 1244 (5th Cir. 1985).
Section 7 of the Clayton Act forbids mergers in any line of commerce where the effect may be "substantially to lessen competition or tend to create a monopoly." 15 U.S.C. § 18; United States v. Falstaff Brewing Corp., 410 U.S. 526, 531, 93 S. Ct. 1096 (1973). But proof of a "mere possibility of a prohibited restraint or tendency to monopol[ize] will not establish the statutory requirement. . . ." du Pont, 353 U.S. at 598.
SureShot raises four claims under the Sherman Act and the Clayton Act, for conspiracy, attempt to monopolize, monopolization, and unlawful acquisition. 15 U.S.C. §§ 1, 2, 18. Specifically, SureShot alleges that (1) TopGolf acquired the very technology that is essential to SureShot's operations, (2) TopGolf refused to provide SureShot assurances that the Protracer technology will be continuously available after its five-year licencing agreement expires, and (3) any support and maintenance requests placed through Protracer would expose confidential information or SureShot's plans to open a new facility.
Topgolf moves to dismiss the claims because (1) SureShot's claims are not ripe, (2) SureShot failed to plead anticompetitive or exclusionary conduct in its complaint, and (3) SureShot failed to plead a relevant market. Dkt. 10. As a threshold matter, the court will first address whether SureShot's claim is ripe, to confer standing. Lujan v. Def. of Wildlife, 504 U.S. 555, 560-61, 112 S. Ct. 2130 (1992).
Standing requires plaintiffs "to demonstrate: they have suffered an 'injury in fact;' the injury is 'fairly traceable' to the defendant's actions; and the injury will 'likely . . . be redressed by a favorable decision." Public Citizen, Inc. v. Bomer, 274 F.3d 212, 217 (5th Cir. 2001) (quoting Lujan, 504 U.S. at 560-61). "An injury in fact [is] an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical." Lujan, 504 U.S. at 560. Standing is jurisdictional in nature and should be decided by the court before reaching the merits of the case. See Steel Co. v. Citizens for Better Env't, 523 U.S. 83, 93-94, 118 S. Ct. 103 (1998).
Topgolf moves to dismiss SureShot's claims, arguing that none of the claims is ripe for judicial determination because SureShot complains of an anticipated denial of access or future breach of contract. Dkt. 10 at 14; Dkt. 14 at 5. Topgolf argues that SureShot has not suffered any harm because Topgolf has continued to honor the terms of the licensing agreement between Protracer and SureShot. Dkt. 10 at 8. Topgolf argues that SureShot's legal theory is based solely on a prediction that someday...
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